Oct. 12 (Bloomberg) -- Australian consumer confidence was little changed in October as the central bank’s signal it has scope to lower interest rates if necessary offset turmoil in international financial markets.
The sentiment index rose 0.4 percent to 97.2, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers taken Oct. 3-8 and released today in Sydney.
Reserve Bank of Australia Governor Glenn Stevens last week left the benchmark interest rate unchanged, citing “very unsettled” financial markets and signs of weaker domestic growth. Stevens indicated less concern about wage pressure from a mining investment boom and said there’s more scope to cut rates.
“Financial markets were again unsettled with sharp falls in both the share market and the Australian dollar,” Bill Evans, Westpac’s chief economist, said in an e-mailed statement. “On the positive side we saw a marked change in the rhetoric of the Reserve Bank. After discussing the option of raising interest rates as recently as August the Bank reported that it had adopted an easing bias.”
The Australian dollar, the world’s fifth-most traded currency, has dropped 10 percent from its record-high $1.1081 reached July 27 amid speculation Greece will default and spur a repeat of the 2008 credit freeze that followed the collapse of Lehman Brothers Holdings Inc.
The decline in the currency impacted sentiment toward buying a major household item, which fell 5.6 percent, today’s report showed. All other components of the Index gained.
The RBA, at its policy meeting on Oct. 4, cited a “softer” labor market and consumers who are “more concerned about the possibility of unemployment rising,” as it kept rates unchanged at 4.75 percent for an 11th straight month.
Monthly employment growth in Australia averaged 2,800 from January through August, less than a 10th of the average of 30,500 in the first eight months of 2010. The nation’s unemployment rate in August rose for a second straight month, reaching 5.3 percent, the highest level since October 2010.
It probably held at that level in September, a government report will show Oct. 13, according to a Bloomberg News survey of 24 economists.
Evans, who in July predicted the RBA would reduce rates at its December meeting, said while that remains his view, a cut next month “is quite real.”
--Editors: Malcolm Scott, Ed Johnson.
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